For New Jersey homeowners who need to start bracing for property tax deduction changes stemming from the Republican tax cut that overwhelmingly benefits the wealthy and corporations, state legislatures are working hard to manage and ease that burden.
The New Jersey Senate has approved legislation sponsored by State Sen. Joe Pennacchio (R-26) to increase New Jersey’s maximum income tax deduction for property taxes to $15,000.
“By increasing our state income tax deduction for property taxes from $10,000 to $15,000, we’re providing real property tax relief to New Jersey residents,” said Pennacchio. “This was a bipartisan effort that I was glad to lead the charge on,” he added.
Pennacchio proposed increasing the state’s deduction for property taxes following
Pennacchio’s legislation, S-64, which comes in response to the passage of tax reforms in Washington that limited the federal SALT deduction for state and local taxes to $10,000, increases the maximum deduction that residents could claim for property taxes when they file their state income taxes to $15,000, a 50 percent increase.
“It would be hypocritical of us to criticize the federal limitation of the deduction for property taxes to $10,000 when New Jersey has long had an identical limit,” added Pennacchio. “While I had hoped to make all of our property taxes deductible, today’s Senate vote represents a good step in our efforts lower New Jersey’s crushing tax burden. I’m glad that after being the first to discuss this proposal last year, I was able to convince my colleagues on both sides of the aisle to work together to move this initiative forward for taxpayers,” he said.
The new law, signed in December by President Donald Trump, should deliver most Americans an overall tax cut in the first few years of the law’s implementation before most cuts for average Americans expiring or even increasing. The cuts most people should see come from provisions that benefit taxpayers across the board, like an increased standard deduction and lower marginal tax rates. Republicans had to keep the projected deficit from the then-bill under a certain amount of money in order to be able to use a parliamentary tactic that allowed for simple majority votes in the Senate instead of cloture votes. Republicans had to partly offset the cost of these broad cuts by doing things like slashing the property tax deduction maximums. They also curtailed some provisions that specifically benefit homeowners, like deductions for mortgage interest and state and local taxes, Time reported.
The new law could hurt homeowners in two ways. There’s the lower cap of deductible property and other state and local taxes at $10,000, which is why the legislature just passed a bill increasing the cap to $15,000 in New Jersey. The new tax cut law also scales back the potential of the mortgage interest deduction. While homeowners could previously deduct interest on mortgage amounts up to $1 million, that limit has been lowered to $750,000, Time reported. The result is that these homeowners’ individual deductions may still be worth more than new, higher standard deduction, but also far less valuable than they were before.
By: Janet Guzman